Pre-settlement loans make money accessible to plaintiffs in lawsuits before their cases are settled. This type of financial assistance enables plaintiffs to pay for the mounting costs that arise during lengthy legal processes. The arrangement is not without controversy, though, and laws governing such funding are still being reviewed.
Understanding Third-Party Funding
In explaining what a pre-settlement loan is, one could say it is the action of receiving money in advance from an expected court award before a final decision in the case has been made. The money being advanced is not coming from the court or the defendant. Rather, the money is coming from a third-party company that will probably require certain documentation about the legal case. Such information as medical records and the like may need to be turned over by the plaintiff’s attorney during the process of approval for such funding.
If the legal case is won, the amount of money that has been advanced, plus the agreed-upon interest amount, will come out of the awarded funds and go to the third-party company that handled the pre-settlement loans. If, on the other hand, the case is not settled in favor of the plaintiff, there is typically no money owed.
According to the U.S. Chamber Institute for Legal Reform, the process revolves around hedge funds investing sums of money in legal suits in exchange for a portion of the final judgment or settlement. The institution says this type of lawsuit funding began in Australia and then spread to the United Kingdom, Canada, the U.S., Europe and Asia.
Obtaining a Pre-Settlement Loan
It is common knowledge that lawsuits and ensuing litigation costs can become expensive and time-consuming. Even when a major verdict is handed down, or when it seems likely that a large settlement will be reached, a long-time period may pass before any money actually reaches the plaintiff or attorney. During this waiting period, however, life’s expenses will continue to accumulate and mount higher and higher.
To qualify for a pre-settlement loan, the following criteria must be met:
- Funding companies will want to have confidence that the case will be resolved in your favor because they are assuming a great deal of risk by offering you a cash advance before your case is settled. Therefore, your case must be strong.
- Your lawyer must represent you on a contingency fee basis. This means that they will only be paid if they settle or win your case.
- The defendant, who is liable for your injuries, must pay for any damages by themselves or through an insurance company.
If the above criteria are met, the following will also be considered:
- Damages: These include any emotional, physical, or financial losses you may experience in an accident. A victim’s injuries would have to be severe in the past to qualify for funds, but today, funding companies may consider less severe trauma, such as soft tissue injuries like strains or sprains.
- Adequate Investment Margins: You will need to inform the funding company of any expenses that may need to be subtracted from your settlement along with your attorney’s fees. Make sure that you disclose information such as jury awards or settlement liens.
- Cooperation with Attorneys: Last but not least, you should let your attorney know that you are using a funding company for an advance on your settlement. They will need to provide the company with documentation about your case and acknowledge the agreement as well.
Different From Traditional Loans
The category in which settlement loans fall has implications for both the plaintiff and the funder. Courts within the states are split on whether or not to consider pre-settlement loans as traditional loans.
The third-party funding companies are represented by a trade organization that claims the products are different than traditional bank loans and should not have the same regulations as traditional loans. One of the main differences between pre-settlement loans and traditional loans is the factor that a pre-settlement loan does not have to be repaid if the plaintiff loses the legal case. Additionally, no credit checks are required for approval because the pre-settlement loans do not affect a consumer’s credit rating and no monthly payments are involved. Some states look at the arrangements as investments, not loans.
Consumer Protection Guidelines
Because each state may view pre-settlement loans in a different light, the resulting regulations produce a “confusing patchwork of state laws on third-party litigation funding,” according to one law professor. A trade organization called the Alliance for Responsible Consumer Legal Funding (ARC) believes laws should provide definite and specific protections such as transparent contracts and plain English. The ARC notes that some states do have a high level of consumer protection. These include Ohio, Maine, Vermont, and Oklahoma.
According to a white paper written by the American Bar Association’s Commission on Ethics 20/20, settlement loan products do fill a need. The commission warned, however, that attorneys must watch for red flags pointing to ethical issues. Attorneys should make sure the confidential information of each client is protected and ensure that a client fully understands all terms involved with entering into such agreements with pre-settlement loans and cash advance providers.
How Do Pre-Settlement Loans Work?
You can quickly obtain financial assistance through The Legal Funding Group. Our process is both seamless and hassle-free for you and your lawyer.
Our entire process is as follows:
1. Introduction
You can call us at (912) 777-3997 or fill out an application online. Initially, we require a basic outline of your case and your lawyer’s contact information. Once we have these details, we won’t need anything else from you for this step.
2. Case Review
With your permission, we will first contact your law firm to get more details about your case. Based on your case type, our underwriters will request specific information from your lawyer. If your lawsuit is a general personal injury claim with a small settlement, we will only ask for simple, straightforward information about the case.
3. Receiving Your Cash
After your settlement loan has been approved through The Legal Funding Group, you can receive your money in a few different ways. A check can be overnighted to you so it can be deposited into your bank account the next day, we can send you a cashier’s check, or we can directly deposit the check electronically into your checking account. Since our loan options are easy and quick, your funds may be available to you in 1 day or less after they have been approved.
The speed at which you receive your settlement loan depends on how quickly your law firm sends us the information we need to review your lawsuit. Once your lawyer has sent us the required documents, your cash will be sent to you in under a day.
Apply for a Pre-Settlement Loan from The Legal Funding Group
The Legal Funding Group offers pre-settlement loans that are trusted and fully transparent. We follow all legal requirements when providing cash advances and loans to our clients. Our services are meant to help plaintiffs and attorneys find financial security during their litigation process. We provide victims with the money they need to help them achieve the rightful outcome they deserve. When you choose us, you can focus more on your recovery and bills and spend less time feeling overwhelmed about financials.
Contact us today to learn more or fill out an online application.
